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Mellon Bank
Details The Mellon Move http://www.pittsburghlive.com/x/pittsburghtrib/opinion/columnists/guests/s_483324.html :by Dick Scaife, Sunday, December 10, 2006 There are some who believe that the only loss we will experience from The Bank of New York's takeover of Mellon Financial Corp. is one of sentimental value. Thus, that has become the basis of their criticism of those questioning the deal. They apparently believe, as Oscar Wilde did, that "A sentimentalist ... is a man who sees an absurd value in everything, and doesn't know the market price of any single thing." In other words, those of us who bemoan the demise of Mellon, headquartered in Pittsburgh, and its reconstitution as The Bank of New York Mellon Corp., headquartered in New York City, place a higher value on Mellon's history than its future. We are living in the past, we are told. We are guilty of "old-think," those pushing this merger say; "these are progressive times and we must act progressively." But they couldn't be more wrong. Indeed, I have a very fond spot in my heart for Mellon Bank. It was my great-grandfather, Thomas Mellon, who founded what would become a Pittsburgh institution in 1869. I served as a member of Mellon's board of directors from 1958 to 1979. The bank played an integral role in this region's rise to industrial pre-eminence in the late 19th century and through the 20th century. Pittsburgh was steel, steel was America and Mellon Bank helped finance much of what truly was a revolution, in steel and other related industries. Of course, times changed. And Mellon changed with the times. Though it was not always for the better. You'll recall the loan portfolio debacle, paced by bad energy and real estate loans, that nearly toppled Mellon in the 1980s. You'll also recall Mellon's recent run-in with the Internal Revenue Service when its employees destroyed tens of thousands of federal tax returns. Some employees were fired. There remain concerns that some higher-ups ordered the destruction; a federal investigation continues. A few years ago, there was a more prudent decision: Mellon returned to its roots -- the mission Thomas Mellon established at the bank's founding -- by shedding its retail banking services (to the far more interested and better operating Citizens Bank, I might add) to concentrate on investment management and securities processing. Ironically, that is what led to "the times" to come knocking again and current management's decision to pull Mellon out of Pittsburgh by its roots. In an apparent attempt to maximize shareholder value and stay ahead of the proverbial curve in this very competitive enterprise, Mellon's new CEO, Robert Kelly, forged a deal with the very same Bank of New York that sought to devour Mellon in 1998 -- then a hostile overture rightly spurned by the banking giant. Keeping Mellon in Pittsburgh -- and independent -- then, unlike today, was more important. But what shareholder wouldn't love this latest deal? After all, it's "value" quickly was manifested in the fortunes of its stock -- boosting a merger first valued at $16.5 billion to about $17.6 billion. Of course, little is said that even with the stock-spiking developments, The Bank of New York's 1998 offer of $23.7 billion was $6.1 billion more than last week's announced price. And that's not even adjusting the 1998 amount for inflation. Indeed, the community should be wary. Virtually no advance notice of this merger was given to our elected officials. E-mails to Pittsburgh and Allegheny County leaders -- by underlings, no less -- 15 minutes before the public announcement hardly is good corporate citizenship. This is the same Mr. Kelly who, as this year dawned and he was newly named as Mellon's chairman, said he couldn't imagine Mellon being headquartered anywhere but in Pittsburgh. As the Trib editorialized on Tuesday, Kelly appears to have shown little imagination for attempting to keep Mellon here -- in a technological age where such business can be done from just about anywhere. Oh, yes, there are grand promises of "new jobs." But hundreds of jobs across the new corporation first will have to be cut, an undetermined number of them in Pittsburgh. Will these new jobs ever materialize? What kind of jobs will they really be? The white-collar kind that the merger is taking out of Pittsburgh and transplanting in New York? Or will they be the kind of service jobs that, after a few months or years, will be outsourced to some foreign country? There's also the pledge of more philanthropic dollars for local causes. But even that rings of an attempt to buy the public's approval of a dubious deal. And though Mellon touts this merger as a win-win situation, The Bank of New York, not Mellon, will control the new behemoth's board of directors. The Bank of New York shareholders, not Mellon's, will control the stock. The headquarters leaves town and, with it, local control does, too. Mellon no longer will be "a Pittsburgh bank"; it will be "that New York bank." And yet again the pendulum of progress swings away from Pittsburgh, a chance to re-establish Pittsburgh as a financial center squandered. It's a lousy epitaph for a once grand American city that constantly seems to take two steps back for every step taken forward. The Mellon Bank that my great-grandfather founded, the Mellon Bank that I helped to direct, the Mellon Bank that served Pittsburgh so well for so long will die as we have known it. And one of the founding legs of Pittsburgh will be amputated with it. Thus, this is not mere Oscar Wilde "sentimentality." For "sentiment" is critical to the well-being of any successful community. It is its essence -- its soul. When institutions stop serving their communities -- as Mellon, from time to time, did -- or leave for supposedly greener pastures -- as Mellon is doing now -- the deficit is as real and damaging as any red numbers in a ledger that cannot be turned black. "Sentiments" are traditional, practical and, thus, necessary parts of a healthy civic life. As essayist William Hazlitt once wrote, we feel sentiments "because they were felt by those who preceded us." They are important, and they are meant to be handed down to succeeding generations. As the Gulf Oils, Alcoas, Dravos, Allegheny Internationals and Rockwell Internationals did before it, Mellon now prepares to take its leave for points it thinks "better" than Pittsburgh. And soon there will be no one to which to pass on our sentiments. Pittsburgh's very soul will succumb to death by a hundred corporate defections, the last of which, Mellon's, could have been prevented had Robert Kelly and the Mellon board even a modicum of vision. Dick Scaife is owner of Tribune-Review Publishing Co. Links * Mellon Bank was the title sponsor of the Mellon Arena.